Local Rom-Com Breaks Out As U.S. Films Fade at Chinese Box Office

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By Robert Cain for China Film Biz

March 27, 2013

For the first time since 2011’s Love is Not Blind, a Chinese romantic comedy has broken out in a big way at mainland theaters. Finding Mr. Right, a modestly budgeted rom-com starring Tang Wei (Lust Caution, Late Autumn) debuted in the number one spot with $12 million in its four-day opening last week, beating out U.S. holdovers A Good Day to Die Hard and Resident Evil: Resurrection.

The plot of the Seattle- and New York-set Finding Mr. Right borrows liberally from the iconic 1993 American film Sleepless in Seattle and its 1957 progenitor An Affair to Remember—even down to the final romantic encounter atop the Empire State Building—in weaving a familiar tale of two damaged souls who heal each other through love. finding mr. right

Produced by Hong Kong’s venerable Bill Kong (Crouching Tiger Hidden Dragon, The Flowers of War), Finding Mr. Right is the sophomore directing effort of Xue Xiaolu, who also wrote the screenplay. Strong reviews and good word of mouth have propelled the film to successively higher grosses each day, putting it on a trajectory to reach a final gross of at least $40 million, which would make it the second highest grossing romantic comedy in Chinese history after Love is Not Blind’s $55 million.

Although A Good Day to Die Hard provided a brief respite two weeks ago, U.S. and non-Chinese films have yet to shake their 2013 PRC box office doldrums. Both Die Hard and Resident Evil dropped sharply over the weekend, and Jack the Giant Slayer managed just $1.4 million on its opening day this past Monday. Die Hard will likely finish in the mid- to high-thirty millions, down at the low end of the range I had projected for it.Box office week ending 3-24-13

Sunday brought an end to the Chinese run of The Hobbit: An Unexpected Journey, which grossed just under $50 million in the PRC, for a rather modest 4.7 percent of its worldwide total. Friday will bring the release of Oz the Great and Powerful, which will encounter some healthy competition from the popular Finding Mr. Right and Drug War, a Chinese crime thriller directed by Johnny To (Romancing in Thin Air, Life Without Principle) that debuts next Thursday, April 4th.

Total nationwide box office amounted to $42 million for the week, a 35 percent increase over the same week last year. Year-to-date China is still running a massive 45 percent ahead of last year, while North America is running 14 percent behind its 2012 total. I’ve often noted on this website that China’s box office will surpass North America’s by the end of this decade. If current trends continue the eclipse will occur by 2019, and possibly even in 2018. It’s becoming an inescapable fact that if you want to succeed in the film business in the near future, you’re going to have to contend with China.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

Hollywood’s Colonization of China’s Box Office

by Robert Cain for China Film Biz

May 30, 2012

Men in Black III opened last week in China to a stellar $25 million box office tally over 3 days, marking the second biggest opening weekend in China this year after Titanic 3D’s massive $58 million April debut.

Men in Black’s first place showing also marked the 19th week in a row that a Hollywood film placed first at the Chinese box office, and the fourth week in a row in which at least the top three films were American.

The last time a Chinese movie topped the charts was the second week of January, when The Great Magician (actually a Hong Kong-China co-production) had no foreign competition, as there weren’t any Hollywood films at all in wide release at the time.

In fact, the last time a newly released Chinese film opened in first place in China was when The Flowers of War (also a Hong Kong-China co-production) did so in mid-December, 2011. Again, there were no Hollywood films in wide release at that time. To find the last time a purely domestic Chinese film topped the box office we must go back to mid-November, 2011, when the romantic comedy hit Love Is Not Blind was champ.

For the year so far, the 12 Hollywood films that were released wide have taken a 64 percent cumulative share of China’s national box office. The roughly 50 (depending on how they’re defined) Chinese-made films have taken a cumulative share of only 17 percent. But if we count only from February onward, when Hollywood films were actually in release, Hollywood’s share was 77 percent. 


(Click on chart to view larger image)

 While this trend of increasing Hollywood dominance bodes well for the American studios, it also raises the question of what Chinese filmmakers, and the Chinese government, intend to do about it.  With the import quota now increased from 20 films to 34, it’s a dead certainty that, at least in the short term, Hollywood’s dominance of China will continue, and very likely increase.

Of course, Chinese distributors and government movie tax collectors are reaping a huge bounty on all these American films, but anyone taking the long-term view must realize that things can’t continue this way for very long. The State Administration of Radio Film and Television (SARFT), China’s powerful government overseer of media, is bound to speak out against the accelerating influence of “western cultural values” among the populace. The political implications of Hollywood’s colonization of China’s movie theaters are far too vast to be ignored by anyone, least of all SARFT.

If and when it decides to act, SARFT can adopt one of two approaches in response to the American cultural ‘invasion.’ It can either choose what I call a constraining strategy, or it can go with an empowering strategy.

Under the constraining strategy, SARFT would limit Hollywood movies’ access to China’s distribution channels. Although China is legally committed under WTO rules to allow foreign films into the country, there is no law that says what kinds of films must be imported, how long they must be made available to audiences, or whether they must be allowed access to the best quality venues and distribution networks.

So, for example, SARFT might decide to allow fewer Hollywood blockbusters into China, and choose instead to release more documentaries, or more movies from India, or Iran, or North Korea. This would be a perfectly legal, WTO-compliant method of reducing Hollywood’s dominance. Or SARFT could also limit the number of theaters each film release would be allowed, or perhaps it could even designate that certain ‘quality’ theaters be reserved for Chinese films, while Hollywood films would be ‘ghettoized’ to lesser theaters.

Although this sort of approach wouldn’t be good for anyone (except possibly the North Korean film industry), it’s not hard to imagine SARFT adopting some of these tactics because they would be relatively easy to implement and they would have an immediate impact. Sure, China’s theater owners and moviegoers and Hollywood’s studios would raise a stink, but China’s government has repeatedly demonstrated its willingness to withstand and even ignore pressure from foreigners and from its own citizens alike.

The downside of this constraining approach is that it would only mask, but not solve, the fundamental problem, which is that Chinese films are unable to compete with American ones. For SARFT to solve this problem it would need to think more creatively and more constructively, and commit to what I call an empowering strategy.

The empowering strategy would take the long-term view of creating value, as much as possible, for everyone involved. The highest goal of this approach would not be to limit Hollywood’s market share, but to maximize China’s, by empowering its film industry. This approach would reduce the burden of censorship, allowing Chinese filmmakers a broader palette of storytelling options to put them on more equal footing with filmmakers in Hollywood and the rest of the world. It would subsidize and support China’s artists and visionaries with story development and filmmaking grants. And it would provide bridges, rather than obstacles, for the world’s best filmmaking talents to come and work in China and help develop the country’s next generation of writers, directors, producers and other filmmaking artists. 

This sort of empowering approach may seem like a utopian dream, but in fact a strategy like this worked beautifully in China’s neighboring country, South Korea. Through the 1990s Korean films held only a 15 percent share of their domestic box office. But under a 5-year government-industry cooperative plan implemented in the mid 1990s, Korea eliminated many of its censorship strictures, invested in training and facilities, created a financial infrastructure that supports film production, and provided grants to writers, directors and producers to kick-start what swiftly became a world-class national cinema. By 2003 Korean films captured a 53 percent share of their domestic market, and Korea became recognized as a major filmmaking and cultural hub for the rest of Asia. 

There’s no reason why China can’t accomplish a similar feat. The entrepreneurial spirit needed to drive film production is already abundant in China. The country’s talent pool needs to be further developed, but it is ready and waiting, and there are plenty of qualified foreign experts willing to jump in and help them. And the money to support an empowering strategy is plentiful—far more money is skimmed by theaters off the top of box office receipts each week than would be necessary to support such a plan. The main thing currently standing in the way of China’s cultural competitiveness is the Chinese government.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

China Passes Japan and is Now the World’s #2 Film Territory

By Robert Cain for China Film Biz

February 2, 2012

You heard it here first: China has surpassed Japan and is now the world’s biggest film territory outside the United States, as measured by total box office revenue.

For the past several months China has handily beaten Japan’s national box office take, and the gap is widening as China’s torrid pace of revenue growth continues.  Although China’s annual total of $2.05 billion for 2011 fell slightly behind Japan’s $2.29 billion, the last few months of 2011 and January of 2012 saw China surge ahead. 2012 will undoubtedly be the year in which China solidifies its position as the world’s number 2 market behind the United States.

.                    Source: Pacific Bridge Pictures research

.             Source: Pacific Bridge Pictures research

Now it is just a matter of time—about 6-7 years if current trends continue—before China overtakes the United States to permanently become the world’s biggest and perhaps most important movie territory.

For Japan, the lingering effects of the 8.9 magnitude earthquake and tsunami that devastated the country last March have certainly been a factor in its descent to #3. Hobbled by the damage to northeastern Japan’s infrastructure, and by a dampened national mood, box office dropped by 10 percent (nearly 18 percent in local Yen currency) from the record-breaking tally of $2.66 billion in 2010.

But even had there been no earthquake, Japan would have inevitably yielded the number two spot to China by 2013. Japan, like the U.S., has been a mature market for some time; even if we dismiss 2011 as an aberration, the annualized box office growth rate there has been in the low single digits for years. China, by contrast, has been growing by nearly 40 percent per year for a decade.

And aside from total box office, China outperforms Japan in other key measures. As a market for Hollywood films, China has the clear edge over Japan. Of the 26 Hollywood films that were released in both territories in 2011, 19 grossed more in China than they did in Japan, many by a very wide margin. Transformers 3 and Kung Fu Panda 2, for example, each grossed 3 times as much in China as they did in Japan. Had China allowed more American films into its theaters last year, it would have undoubtedly surpassed Japan in total box office in 2011.

.       Source: Pacific Bridge Pictures research

China also offers better upside for its domestic films than Japan does for its films. The top grossing Chinese films of the past year—The Flowers of War, Flying Swords of Dragon Gate, Let the Bullets Fly and Aftershock—have all earned more than $85 million in their domestic Chinese releases. During the same period, not one Japanese-made film cracked even $60 million in Japan.

The implications of China’s rapid ascension are enormous for the global entertainment business. As China’s theatrical business grows, so will its television and home video industries. In the coming years China’s global share of the entertainment pie will expand from the low single digits to 20 percent and higher, and China’s buyers will rapidly gain clout in deciding which films get made, and how and where they are produced. The flows of capital for production and marketing of movies will increasingly come from China. By simple attrition, U.S. tastes will become less dominant, and Chinese tastes will become more influential.

Hollywood’s major studios have been extraordinarily slow to respond to China’s emergence. It is no longer reasonable for them to expect that China will play by their rules, or that Hollywood will remain the world entertainment industry’s center of gravity for much longer. Any of us who hope to enjoy career longevity in the global film business had better start thinking and acting more with China firmly in mind.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

China’s Box Office: Zhang Yimou’s ‘Flowers’ Still Smell Sweet

By Robert Cain for China Film Biz

December 27, 2011

For the week ending December 25th, 2011, Flowers of War and Flying Swords of Dragon Gate once again held the first and second spots in what was a very good but not great weekend at the Chinese box office.

The $71 million cumulative box office total may look good at first glance—indeed, it was the second best week of 2011 after Transformers 3’s opening week in July, and Flowers set a new single-week record for a Chinese film. But the total box office was actually up only 4 percent on a Chinese RMB basis compared with the same week last year. And considering that there are 45 percent more movie screens operating across China now than at this time last year, the past week’s box office looks downright unimpressive by comparison.

The problem may have been the oversaturation of Flowers and Flying Swords. Those two pictures grabbed up more than 80 percent of China’s 9,000 screens, leaving little else in the theaters for moviegoers who might have wished to see a different film. The strongest new opener, China Film Group’s romance Dear Enemy, managed just $6.5 million in sales, and the second best, The Allure of Tears, brought in $3.8 million. The rest of the field, a mix of 3 holdovers and 3 new releases, every one of them Chinese, brought in a grand total of $600,000.

Flowers of War will pass Beginning of the Great Revival this week to become the highest grossing Chinese film of 2011. With a couple more strong weekends it could possibly challenge Kung Fu Panda 2’s  $92 million China gross for the number two spot among all films released this year. But even if it does reach that lofty height, Flowers will only recoup a third or so of its negative cost in China. In order to break into the black it will have to gross, at minimum, $120 million in the international marketplace. This has only happened once before for a Chinese film, when Crouching Tiger, Hidden Dragon became a breakout hit in the United States back in 2001. Flowers of War lacks the compelling narrative, the exotic appeal, and the universally resonant themes that Crouching Tiger offered, so the possibility that Flowers might replicate those numbers seems remote.

The most important box office news this week is that China’s cumulative gross for the year has definitely crossed $2 billion, making it only the third country in history, after the U.S. and Japan, to reach that mark. Even more remarkably, it was only last year that China crossed the $1 billion mark for the first time ever. The above analysis notwithstanding, a $71 million box office haul in one week would be extraordinary anywhere in the world outside North America; it’s indicative of China’s incredible growth that the number fails to impress only by comparison against last year’s numbers.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

Beijing’s (Bloodless) Boxoffice Battle

By Robert Cain for China Film Biz

December 7, 2011

Here in the West we share a fundamental, almost genetic conviction that our democratic free market approach to business is superior to the East’s planned economy model (for thoughtful counterpoint to this Western notion, see Andy Stern’s excellent Wall Street Journal article from December 1st).

But sometimes having a Big Brother calling the shots can be an advantage. With a single, authoritarian party making major policy decisions, you get to avoid the perils of deadlocked senates, of do-nothing super committees, and even, sometimes, of the wrenching, blood-spattered forces of supply and demand.

And if you’re an enterprising Chinese producer with an axe to grind, having all-powerful government decision makers to settle a score can be a very good thing indeed.

The SARFT hammer of justice

The talk of the industry last week was the David vs. Goliath style battle between producer Zhang Weiping and the entire Chinese theatrical exhibition establishment. Zhang had demanded that theater owners across China raise their minimum ticket price from 35 yuan ($5.50) to 40 yuan ($6.29), and that they lower their after-tax share of ticket sales from 57 percent to 55.

Zhang was looking to protect the nearly $100 million that’s been invested in The Flowers of War, his latest collaboration with his mega-director partner Zhang Yimou. The film, which stars Christian Bale, is the costliest in Chinese history, and is set to open wide next week. Under the existing structure distributors receive only 39 percent of each dollar, or yuan, of ticket sales, and after the distributors’ cut producers get substantially less than that.

As Zhang Weiping put it, “For producers in China, the only way to get a return on investment is through ticket sales. Ancillary products do not sell well. Raising ticket rates could help keep movies from being fast food and junk food.”

An increasingly disproportionate share of revenues has gone to theater owners, who have been steadily increasing their slice of the box office pie, along with the rents they charge to the companies that operate their theaters.

But in swift and stunning fashion last week, China’s State Administration of Radio Film and Television (SARFT) ended the brewing battle by hammering out a decree with far-reaching effects for the industry.  With its jazzily titled document “On Promoting the Coordinated Development of Movie Making, Publishing and Releasing,” SARFT shoved aside free market economics and proclaimed these new rules:

  • “In order to balance the benefits of distribution between production companies, distributors and exhibitors, referring to international conventions, cinemas can get no more than 50% of the box-office revenue in the first run in the future.”
  • “In order to promote the sustainable development of cinema construction, we suggest the annual property rent for cinemas should be less than 15% of the annual box-office revenue.”

The first rule was obviously a major victory for film producers and distributors. As Zhang Weiping rightly pointed out, theatrical revenue is the lifeblood of Chinese producers. The 7 point bump in their share will spell the difference between profit and loss for many Chinese films.

The second rule was aimed squarely at the real estate developers and theater chain owners who lease their cinemas to third-party operators. Rents had been on a steady climb, with rising profitability fueling an exuberant binge of cinema building; China’s total screen count has nearly doubled since 2009 to around 8,900. With this second ruling SARFT’s intent seems to be to tamp down investment and cool off the rate of new construction.

No mention was made of ticket prices, which will presumably be left to the discretion of theater operators.

Theoretically this new set of rules should benefit non-Chinese producers and distributors too, but at this point it’s unclear—and perhaps unlikely—that any of the 7 extra points will be passed along to them.

The long-term effects of these rules remain to be seen, but it seems a safe bet that curtailed theater profits will result in a diminished rate of new theater openings, and that China’s blazing domestic box office growth will slow as well.

Given these dramatic recent developments, now may be a good time for Hollywood to amp up its own campaign for an increased share of the revenues its movies generate in China.  After all, if a single producer can motivate China’s movie czars to make dramatic changes for the better, then certainly the world’s most powerful media companies can do the same.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.